Stimulation of osteoblast differentiation and mineralization from mesenchymal stemcells is a potential new approach for bone regeneration and repair. Traditionally, large molecule growth factors such as bone morphogenetic proteins (BMPs) have been used in humans and animals to regenerate bone. Unfortunately, the use of these biological factors has shortcomings. Protein instability, cost, immunogenicity, and supraphysiological dosage are the major concerns involving BMPs. There is thus a need to examine alternative growth factors that can reduce or even avoid these limitations. Here we propose a new strategy for bone regeneration via osteoblast differentiation using a stable small molecule. Preliminary data in the P.I.'s group suggest that a newly developed small molecule cAMP analogue, N6-Benzoyladenosine-3',5'- cyclic monophosphate (6-Bnz-cAMP), promotes initial cell adhesion and supports proliferation on biodegradable polymeric poly(lactic acid-co-glycolic acid) scaffolds. Further, it induces differentiation and matrices mineralization of osteoblast-like MC3T3-E1 cells. The objectives of the present research proposal are 1) to evaluate the osteoinductive potential of 6-Bnz-cAMP in rabbit mesenchymal stem cells, 2) to directly compare the osteoinductive effects of 6-Bnz-cAMP and BMP-2, 3) to develop and evaluate a novel bone grafting material system comprising biodegradable PLAGA microspheres matrices with small molecule 6-Bnz-cAMP. The biological performance of the novel 6-Bnz-cAMP loaded microsphere based scaffold will be examined in vivo using a rabbit ulnar critical size defect model. We hypothesize that the bioactivity of the proposed microspheres scaffold system will be significantly improved by the incorporation of the small molecule 6-Bnz-cAMP. We further hypothesize that the use of the small molecule- polymeric matrix system will result in bone tissue regeneration in vivo.